Draw the Law: Government and Business, Part II: The Judiciary

Hello readers, mahalo for stopping by and checking out this second of a series of Draw the Laws on government and its interaction with business.  For this week’s post, and the next two, I fill do a brief survey of the three branches of the US government (as well as the State of Hawaii).  So I am going to start off with one that attorneys are quite familiar with, the judiciary.  Fellow attorneys, this is meant for laypeople and is a bare bones run-through, don’t tell me what I missed because I am trying to keep this brief (pun intended).

Purpose of the Judiciary

The judiciary, if you remember your civics class, is comprised of a series of courts that are meant to apply the laws of the government. It is a formal mechanism for dispute resolution.  While there may be some quibbling over this, the reality is courts and judges do NOT make laws.  They can strike down laws made by legislative bodies that are unconstitutional, this is known as “judicial review.”

The Federal System: US District Courts

The federal court system is broken into different regions, and the starting point for a plaintiff is district court.  If a party does not like the verdict they can always appeal to the appellate courts, which are in turn checked by the US Supreme Court, which rulings affect the entire country.

A lawsuit begins in the judicial system when a plaintiff files a suit.  If this is a federal lawsuit this suit begins its journey in a trial court known as US district court.  Without getting things complicated and preventing you from getting too bored with this post, know that there are several US districts broken apart by region. Further, know that you cannot just file a federal suit and any court can hear it.  The Congress must grant the court the jurisdiction (power) to hear the subject matter of the dispute.  For example, US district courts can hear matters when it is a civil action between citizens of different states.

Why does this matter?  If you are a business here in Hawaii and you get into a contract lawsuit with a California business, the California business may pursue a suit in federal court, which may be more costly than a state lawsuit if it was between two local businesses.

This is why we transactional attorneys put in jurisdiction and choice of forum clauses to prevent a lawsuit in another state and applying the laws of that state when engaging business with someone from another state.

The Federal System: Appeals Courts

The Appeals Courts is where you turn to next if you don’t like the ruling of the District Court.  Just note that Hawaii is located in the 9th Circuit Court of Appeals.

So for a party that loses, and wishes to appeal, that party will find their lawsuit at this level of the judicial branch.  Due to the fact that the US Supreme Court only hears fewer than a 100 cases a year, the United States Courts of Appeals tend to be the final stop for cases appealed.  Further, the process of appealing is expensive and less open in terms of the scope of the lawsuit.  District courts gather evidence and judges or juries make a decision based on the evidence presented.  However, with appeals courts that is NOT the case.  Appeals courts only review the decisions of the US district courts to see if there was an error in law. They do not take in new evidence, such as hearing witnesses, from the parties, and only the parties’ attorneys are allowed to speak to the court.  Therefore, this mechanism as you can see makes it difficult appealing a lower court’s ruling.

In district court the two sides present evidence to the judge or jury through evidence, testimony of witnesses, etc . . . however, once a verdict goes up on appeal the judges at the appellate level can only review what was presented at the lower court and cannot take in new information.

As a business what you need to understand is that if you lose a lawsuit at the lower level, you and your attorney need to weigh the risks and costs of appealing such a loss, and seeing if it is worth it to get an appeal.  Sometimes it is used a negotiation strategy to bring a party that is exhausted from a suit back to settlement talks.

The Federal System: The US Supreme Court

The Supreme Court of the United States (aka SCOTUS) is the highest court in the United States.  It has the ability to hear all federal court cases and over state court cases involving issues over federal law.  It should be known to anyone seeking to get their case to this level is that it is a long and costly road, as you would have had to gone through district court, appeals court, and lost at those rounds, and then ask SCOTUS to hear the case.  The chances of you bringing up a controversy that meets the hearing criteria of the 9 Supreme Court justices is rare as I stated above.  Lastly, there are only certain lawyers and firms that handle Supreme Court cases.

However, the influence of the Supreme Court can be felt throughout the land. The (in)famous decision of Citizens United vs. Federal Election Commission basically held that the First Amendment prohibited the government from restricting independent political expenditures by corporate entities.  Rightly or wrongly, depending your take on this, your business entity, association, or union may spend its money on independent communications, such as television whereby you can endorse or call to vote against specific candidates.

The State of Hawaii Judiciary

Basically, the State of Hawaii’s court system is broken up similarly to the federal system. We have circuit courts that handle different islands of the state, with the First Circuit handling Oahu. After the circuits, we have an Intermediate Court of Appeals (ICA). Finally, the Hawaii Supreme Court functions much like SCOTUS, but at the state level.  For the most part, these courts will handle Hawaii cases and controversies.  Therefore, if your employee sues your company for violating Hawaii worker laws it will be in a state court, and if you lose you may appeal to the ICA, and if the case warrants it the Supreme Court may hear it.

Why does this Matter to Your Business?

So in this example business A had a judgment against it for injuring its customers, and now that the damages are awarded that would invariably effect business B's decision to buy A. Even if the lawsuit is over, does that mean that Business A's practices will lead to another suit? Can it pay off the judgement? All things to consider when entering a lawsuit in the court system is things become public.

While this post is brief in terms of its coverage of the scope of the judicial branch, the main thing I want you to get out of it is that if you are a business consider a) if you go through a lawsuit all of that information becomes public, you are exposing your business information becoming public record; b) because of this is a deal to buyout a company, attorneys go through a “Due Diligence” phase where we basically dig up everything, including court records, that may affect the valuation of the business, including court documents; and c) if you have a business that requires its employees drive on behalf of the organization you may want to obtain a traffic abstract or traffic court report, as it is a part of your duty to make sure an employee is fit for driving for your company.

The courts exist to resolve disputes, and many times your business will engage with customers, clients, other businesses, and the like that the results may not end the way you expected and sometimes that will draw you into the judicial system.

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.  Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.